Publicis secures toehold in Japan

Publicis’ deal with Y&R may have fallen through, but the French agency has finally forged a long sought-after partnership with Japan’s second largest agency Hakuhodo.

While attention has recently been focused on the possibilities of a Publicis rapprochement with Young & Rubicam, the French agency has quietly forged an alliance in Japan with the country’s second largest agency: Hakuhodo. The agreement comes after more than a year of talks, and follows earlier rebuffs from Hakuhodo and other agencies which Publicis sought to acquire or partner.

Hakuhodo’s change of heart was prompted by the opportunity to wrest the &£10m Renault account in Japan from Dentsu – which happened automatically once the Publicis alliance was formed.

No equity is involved in the deal, so the new partnership is essentially a revenue-sharing affiliation. But at least it gives Publicis its long-sought entrée to a major Japanese agency. Though Publicis would have preferred an equity-based relationship, Hakuhodo’s owners are not willing to enter into new equity relationships until after its initial public offering – expected in 2003.

As it turns out, Publicis will not now be entering a partnership with Dentsu through the latter’s joint venture with Y&R. Nonetheless, Dentsu executives are keeping their lips sealed about how they would view a change in ownership at Y&R now that WPP has emerged the victor. Observers anticipate that a takeover of Y&R would herald the gradual demise of Dentsu Young & Rubicam.

Meanwhile, TBWA’s new partnership with Hakuhodo – G1 (a global alliance designed to exclusively serve Nissan) – is proving a mixed blessing for TBWA in Japan. Glob ally, Hakuhodo and TBWA have equal shares in the new venture, but Hakuhodo has an 80 per cent stake in Japan, where Nissan’s domestic business is being consolidated. G1 is essentially Hakuhodo’s Nissan account and creative teams that join G1 in Japan will remain loosely under Hakuhodo’s overall management control. As a consequence, TBWA-Nippo – the renamed house agency TBWA bought from Nissan in 1998 – will lose about 50 per cent of its Yen40bn (&£24m) gross billings.

Two other agencies continue to have small shares of the overall Nissan budget: Dentsu, which is completing a project to revamp signage at Nissan dealerships, and Standard Advertising, which places some export advertising in overseas media. Neither assignment is expected to be extended when current obligations are fulfilled.

There’s little comfort for TBWA in the knowledge that – through G1 – it has a 20 per cent share in the Nissan business in Japan. Privately, some Hakuhodo executives doubt Nissan’s media commissions will exceed seven per cent this year, and they are pessimistic about the future profitability of the &£350m account, given Hakuhodo’s high overheads, which also apply to G1 in Japan. TBWA’s share of Japanese profits could be negligible for years.

Despite these uncertainties, TBWA-Nippo continues to have a large client roster. The challenge is to craft a strong creative agency without the substantial contribution of the Nissan account and handle problems with morale resulting from the Western-style downsiz ing of an agency immersed in a traditional culture where such things aren’t supposed to happen.

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